Many Federal Reserve officials believe the central bank can "afford to be patient" on further increases to their benchmark interest rate, according to minutes of their December 2018 meeting.
The minutes underline the recent dovish tone among Fed officials, who see muted inflation pressures and have highlighted some growing uncertainties on the economic outlook.
The Fed raised its benchmark federal funds rate for the fourth time in 2018 at the meeting, but it signaled a less aggressive approach heading into this year. The median projection from Fed officials shows they are now penciling in two increases in 2019, down from their earlier projection of three.
"Participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier," according to the minutes of the Federal Open Market Committee meeting.
Fed officials generally believed "some further gradual increases" in interest rates would be necessary, and most thought a rate hike was appropriate at the December 2018 meeting. But a few wanted the Fed to keep the rate unchanged. Those officials said that the benign outlook on inflation gave the FOMC "some latitude to wait and see how the data would develop" in the coming weeks.
The minutes detailed the contrasting signals Fed officials have received in recent weeks. Incoming economic data is continuing to show underlying strength, the minutes said, with labor market gains continuing and household spending growing strongly.
But the Fed also took note of volatility in the financial markets and tighter financial conditions, including a flatter yield curve, and officials are hearing more concerns from business contacts about the global outlook.
Fed officials are also open to the possibility that the economy could grow faster than they expect, particularly if a boost from fiscal stimulus is larger than they anticipate and trade tensions between the U.S. and China ease.
A number of Fed officials said that before they make any further adjustments, the committee should weigh whether growing economic risks might dent their projections. Those officials also said they should examine the effects of their previous rate hikes, which were "likely still working their way through the economy."
Fed Chairman Jerome Powell, who markets thought had been too hawkish at his December 2018 news conference, said Jan. 4 that the Fed "will be patient" as it continues gradually tightening monetary policy and that it was paying attention to market signals.
Three regional Fed presidents also weighed in on the economy during separate events Jan. 9. Chicago Fed President Charles Evans highlighted the hazier outlook but said economic fundamentals remain sound, while Boston Fed President Eric Rosengren said the markets have been "unduly pessimistic" in recent days. The two are voters this year on the FOMC.
Atlanta Fed President Raphael Bostic, who does not vote on monetary policy this year, said the Fed should be patient on rate hikes and "wait for greater clarity about the direction of the economy and the risks to the outlook."